Hits and misses

John Evans may be contacted on +44 (0) 207 637 9111, globalproducts@logica.com. Reporting by Timon Molloy

The Royal Bank of Scotland Group (RBS) fine by the UK Financial Services Authority (FSA) for sanctions controls, notably payment screening, failures must have played right into AML/sanctions technology vendors’ hands – “Well, it doesn’t surprise me,” says John Evans, Director, Financial Crime Solutions, Logica when we meet at his office near King’s Cross in London. He pointed to a wide variation in industry practice: “Some institutions are screening between 600,000 and 1.2 million payments a day while other very large peer banks are only looking at 100,000 – it doesn’t really make sense.” Evans has asked UK banks if they are screening everything they should against the sanctions lists and when they say yes, he queries if that includes non-SWIFT payments. At that point, they tend to become a bit defensive. “The whole issue of what to scan and how much – whether the whole, or just part of the message and hope for the best – is in play.” As the list of those hit with fines and onerous deferred prosecution agreement terms over sanctions compliance breaches lengthens, the risk appetite for setting a tight, limited scope to screening reduces. If an individual in a payment scores an 85%+ fuzzy logic match against a watchlist entity most banks will want to take a closer look, says Evans. The challenge is to design software that will distinguish good from bad, true from false positive hits, beyond this cut. “It’s a question of efficiency.” For all the big banks? “Unquestionably.” The problem grows with the payment set – as it expands to cover, perhaps all domestic and SEPA (Single Euro Payments Area) transactions. In Logica’s 2010 survey of EU AML professionals [1], 30% of respondents believed that their bank would not be able to scale existing payments filtering operations effectively to handle foreign domestic payments traffic.